Goods Issue to Subcontractor at MAP or Price of Purchase which ever is high

[Former Member]

Dear Sir/Madam,

The scenario is like this :

I have raised a Purchase Order for a material (say ABC) to be kept in stock and to be issued as and when requisitioned by the user.

Quantity of PO 100 nos. Unit Price : Rs. 10 per no. and Total Price of PO = Rs. 1000/-.

I prepare a Goods Receipt for these 100 nos. hence GR value will be Rs. 1000/-.

Stock will be 100 nos. and the Moving Average Price will be Rs. 10/- and Value of Total Stock will be Rs. 1000/-.

I have prepared another PO for a material (say ABC).

Quantity of PO 100 nos. Unit Price : Rs. 8/- per no. and Total Price of PO = Rs. 800/-.

Goods Receipt is prepared for these 100 nos., hence GR value will be Rs. 800/-.

Stock will be (100 nos. + 100 nos.) = 200 nos., Value of Total Stock will be (Rs. 1000/- + Rs. 800/- = Rs. 1800/-) and the Moving Average Price per unit will be Rs. 1800 / 200 = Rs. 9/-.

I have to issue the material to the Sub-contractor for executing a particular job.

The requirement is to issue the material to subcontract at the highest price (i.e. Rs. 10 per unit) instead of issue of Material at the Moving Average Price (i.e. Rs. 9/-). This is required to ensure that the contractor does not report loss of materials in order to avail benefit of difference in market price and price at which the company issues material to the contract (i.e. the contract the may sell the material at a cost of Rs. 10 per unit and repay the issuing company Rs. 9/- per unit (MAP at which the material is issued to him).

This requirement is audit point and has come as an audit compliance for us.

The problem is my Stock Value is Rs. 1900/- so I can book a consumption of only Rs. 1900/-, but if I am able to issue goods of Rs. 2000/- where will be a negative consumption of Rs. 100/-.

Please suggest if it is possible and if possible advisable and what should be the accounting entries that will be posted and to make goods issues at market price or price which is higher in the SAP. How can this be achieved.

Thanks in advance.

AJ

[Former Member]

answered

[Former Member]

Hi,

Activate batch management with split valuation (valuation category X) .This would ensure that a separate valuation record would be created for each batch as per receipt value .The consumption from the subcontractor stock would also happen based on the batch with which you hit consumption

Regards

Sandeep

[JL23]

you dont really issue goods to your subcontractor, you just transfer them to your subcontractor, they never leave your ownership. it is just like a storage location to storage location transfer. there is no accounting document for that.

the component material is consumed when you do the goods receipt. here system takes always the valuation price from your material master, if material MAP managed then MAP, if standard price managed the standard price.

[former_member182673]

You either have Standard price for valudation or Moving average price for valuation. These are only choice available, what you have outlined is a different type of valuation and it is dynamic. Ideally this needs to be questioned on why this is required, but given it is an audit requirement, what I can think of is sort of report that can track these goods issues to sub-contractor and then a direct journal entry can be posted to the relevant accounts to reflect this additional price.

[Former Member]

Hi,

If i understood correctly then in your case subcontracting material and the material which you are receiving from subcontractor after processing is same.

For same material A - You have created sub contracting info record with value as 10.

You issue same component raw material to it..how you have mapped the finish product in this case ? At the time of consumption of raw material ( 541 ) it will take MAP only..

Regards,

Deepak Gupta

[Former Member]

Dear Deepak,

Thanks for your prompt and useful answer. This would be ideal if i am using the Item Category as "L", but here the material is being issued to the subcontract for a service order with a customized Z.. movement type and consumption is booked with a customized Z.. movement type. The payment of the subcontractor is being processed through a service entry sheet.

Please suggest how to handle the same if material is issued against a service order.

Thanks in advance.

AJ